Game theory has always been a hobby of mine. Though I've never studied professionally, I've done research online. The bailout has intrigued me greatly, as it seems a great study down the road for future game theorists. Both Republicans and Democrats have those on their side who seem to think it necessary, but neither side wishes to own it. What would game theory think of this? What of those people who feel that the financial system needs to be taken down a notch, even if they are included?
The first game I compared the situation to is the well-known "Prisoner's Dilemma." (http://en.wikipedia.org/wiki/Prisoner%27s_dilemma) In summary, it states that both actors would do better to work together, than apart, yet the rational choice seems to be self-preservation.
We saw this at work today in the House of Representatives. It would most likely be best for both Reps and Dems if they worked together to form a bipartisan bill. They could then claim to have stopped a serious depression (or the chances of it). Yet, both sides were wary of trusting the other, fearing each would blame the other's votes should any negative publicity arise. Hence, the collapse of support.
The interesting side of this is that usually, after multiple iterations of the game with the same players, players tend to figure out the best long-term strategy is cooperation. It's not a surprise that politicians can not figure this out.
Another game that Congress and the American people are playing is the well known "Chicken". (http://en.wikipedia.org/wiki/Chicken_(game) ) Both sides do not want to blink: one side does not want to be known as those supporting Wall Street, irresponsibility and socialism; the other side does not want to be known as being so stubborn that they caused the Great Depression, Part 2.
Yet neither side has felt enough pressure to swerve away from their current positions, and neither looks to anytime soon. There is no true "swerving" here, as the options are mutually exclusive. Either the bill will pass, or it won't. The question is, which driver will grab their wheel first?
Finally, I looked at the "Ultimatum" game. (http://en.wikipedia.org/wiki/Ultimatum_game) Again, in summary, the game involves one person being given an amount of money, say, 10 dollars. He can offer any amount to the second person. If the second person refuses the money, neither gets any payout.
The "rational" decision on the part of the offerer would be to offer as little as possible (in this case, we shall say a dollar.) The "rational" choice by the offeree would be to accept that, because he is a dollar richer. However, that is not the case.
In most cases, the one being offered such a low amount will usually deny it. Why? Most theorize that there is an emotional benefit to not accepting the offer. We can see that in play with the bailout among some of the public.
Many agree that if there is no bailout passed, then it will affect the economy greatly. However, rather than take a small amount (of pain) now, they prefer to punish the other party (Wall Street) as well. These people are not acting "rationally", and yet, many people around the world engage in these same choices! So it is not to be unexpected.
If there are those who know more about game theory, please post. Again, this is just a hobby of mine. But I'm sure real game theorists will have enough to study from this mess to create whole new theorems...
Rational actors, my left foot! This is politics!